Landlords hit by rising buy-to-let costs

With savings returns remaining low, residential property has continued to attract income-seeking investors, supported by cheap lending, strong tenant demand and stable yields in recent years. Buy-to-let remains a core investment despite tax and regulatory changes and a growing private rented sector, which now houses one in six people.

However, signs are emerging that investor appetite is weakening ahead of the Tenants’ Rights Act coming into effect on May 1. At the same time, rising mortgage costs are putting pressure on landlords, raising concerns over the short-term outlook for the sector.

Buy-to-let mortgage rates are rising sharply amid unrest in the Middle East, according to MoneyFactsCompare, adding to the financial pressure on landlords ahead of new rental rules.

Average two- and five-year fixed rates have both increased since the beginning of March 2026. The two-year rate is now at its highest in over a year (5.40%), while the five-year rate has hit a two-year high (5.91%).

For landlords, this means higher costs. Monthly repayments on a typical £250,000 loan over 25 years are now around £1,100 higher than at the start of the month.

Product choice has also reduced, with around 1,300 buy-to-let deals withdrawn since March, taking total availability below 5,000 for the first time since November 2025.

Further costs are on the horizon. Landlords are preparing for the Tenant Rights Act in May and may need to spend up to £10,000 per property to meet minimum EPC C requirements by 2030, putting additional pressure on returns.

Rachel Springall, finance commentator at MoneyFactsCompare, said: “The rising costs of borrowing will cause pain for landlords this year, as they join millions of consumers facing higher mortgage repayments. This is terrible news, as rising costs could lead to higher rental payments for tenants, or a decline in the pool of properties available to rent if landlords decide enough is enough and sell off their portfolio. In the Middle East The unrest has wreaked havoc on the residential mortgage market, sending buy-to-let rates soaring and hundreds of deals removed from sale.

“The positive sentiment entering 2026 has been shattered, and landlords not only face higher borrowing costs, but also have to prepare themselves for the Tenants’ Bill of Rights, which comes into effect at the beginning of May 2026. Those who were to take out a mortgage now compared to the beginning of this month will face higher payments of more than £1,100 per year. This is based on borrowing £250,000 over 25 years. 5.29%, versus 4.66% in early March 2026.

“It is entirely possible that landlords may have to take out additional loans this year to cover renovation costs, to ensure they comply with the Decent Homes standard, which is set out in the Tenants Bill of Rights, which is coming into effect again this May. “It is certainly essential that tenants feel safe in their homes, and with rising costs expected this summer it will be even more essential to make housing as energy efficient as possible.

“Thankfully, much progress has been made in making private lettings more energy-efficient over the past six years, under Minimum Energy Efficiency Standard (MEES) rules, under which landlords are prohibited from renting properties with an EPC rating below E. However, landlords’ costs will rise further as they are expected to have to invest up to £10,000 as an expenditure threshold to reach an EPC rating C by October 2030, which is equivalent to A. Subject to value.

“If that EPC rating is not achieved, landlords could face substantial fines, as the rules apply to all tenancies. It will be important for new or existing landlords to learn about the changing legislation and seek advice on how rising costs and interest rate increases will affect their profit margins.”